On the Antitrust Economics of the Electronic Books Industry

29 Pages Posted: 12 Nov 2013 Last revised: 25 Sep 2014

See all articles by Germain Gaudin

Germain Gaudin

Copenhagen Business School; Telecom ParisTech

Alexander White

Tsinghua University - School of Economics & Management

Date Written: September 24, 2014

Abstract

When Apple entered the ebook market, prices rose. A recent court decision found Apple guilty of colluding with publishers, blaming the price hike, in part, on agency agreements and prohibiting their use. Building a model to compare these with traditional wholesale agreements, we identify a single, pivotal condition that leads prices under agency to be higher than under wholesale with two-part tariffs but lower with linear pricing. Our model shows that the increase in ebook prices can be explained, instead, by heightened competition for reading devices, and it guides our understanding of when restricting agency agreements is advisable.

Keywords: Electronic Books, Antitrust in High-Tech Industries, Vertical Contracting, Wholesale vs. Agency Agreements, Media Economics

JEL Classification: D21, D40, L23, L4, L42, L51, L82, L86

Suggested Citation

Gaudin, Germain and White, Alexander, On the Antitrust Economics of the Electronic Books Industry (September 24, 2014). Available at SSRN: https://ssrn.com/abstract=2352495 or http://dx.doi.org/10.2139/ssrn.2352495

Germain Gaudin

Copenhagen Business School

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Telecom ParisTech ( email )

46 rue Barrault
F-75634 Paris, Cedex 13
France

Alexander White (Contact Author)

Tsinghua University - School of Economics & Management ( email )

Mailbox A-44
Weilun Building
Beijing, 100084
China

HOME PAGE: http://alex-white.net

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